Abstract The taxation base articulated in Kautilya's Arthasastra has attracted renewed interest by economists. Their assessments have generally been positive. That it coheres with modern taxation principles and is indicative of the benign social contract Kautilya devised for his idealized state of territory-c*m-people or janapada. The developmental, hegemonic Kautilya-Mauryan state was in fact a domain as well as a tax state, endeavouring to monetize, marketize and expand the economy. However, its over" extensive public sector, close alignment with the higher classes, excess socio-economic regulation and revenue needs, resulted in a combined property, taxation and transfer regime that likely retarded entrepreneurship, private capital accumulation and long-run economic growth prospects. Thus the social contract subsisting in the Kautilya-Mauryan state was not as benign as frequently portrayed, despite laws, principles and doctrines in Dharmasastra and Arthasastra delimiting the constitutional metes and bounds of monarch and state.